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How does regulatory monitoring of cause marketing affect firm behavior and donations to charity?
International Journal of Research in Marketing ( IF 8.047 ) Pub Date : 2022-01-17 , DOI: 10.1016/j.ijresmar.2022.01.003
Praveen K. Kopalle 1 , Aradhna Krishna 2 , Uday Rajan 3 , Yu Wang 4
Affiliation  

Cause marketing (CM) typically involves for-profit firms donating part of their sales revenue to a charity, with the hope that this will increase their revenue. We argue that it is important for a regulator to monitor firms’ CM activities, and to assess how differences in the enforcement of CM laws impact the CM practice by firms. Our analytical model uses a Stackelberg leader–follower game that endogenizes the regulator’s decision to enforce CM. The firm then decides whether to truthfully declare or overstate the amount it contributes to charity (and if overstate: by how much). We find the following results in equilibrium under different conditions: (i) CM campaigns are a win–win–win situation – they increase profit for the firm while being truthful, generate larger donations for the charity, and generate a cause marketing surplus for the regulator, resulting in doing well while doing good, (ii) the best response of the firm is to be strategic, even when the regulator is strict with monitoring, (iii) the regulator itself decides not to monitor CM, even though it knows that this results in untruthful behavior by firms. When we endogenize the extent of overstatement, we find that the firm tends to be strategic by overstating donation percentage, whether the regulator is strict or not. As the proportion of unsophisticated consumers (who believe a firm’s claims, whether truthful or not) increases, the donation proportion decreases in general, and the overstatement level increases when the regulator is lenient and decreases when the regulator is strict. In equilibrium, the regulator is strict if the market size is large, and lenient otherwise. A survey with consumers supports key modeling assumptions regarding consumers' lack of knowledge of CM laws.



中文翻译:

公益营销的监管监控如何影响公司行为和对慈善机构的捐赠?

公益营销 (CM) 通常涉及营利性公司将其部分销售收入捐赠给慈善机构,希望这将增加他们的收入。我们认为,监管者监控公司的 CM 活动并评估 CM 法律执行的差异如何影响公司的 CM 实践是很重要的。我们的分析模型使用了 Stackelberg 领导者 - 追随者博弈,该博弈将监管机构执行 CM 的决定内生化。然后,该公司决定是否如实申报或夸大其对慈善事业的贡献(如果夸大:多少)。我们发现以下不同条件下的均衡结果:(i) CM 活动是一个双赢的局面——它们在诚实的同时增加了公司的利润,为慈善机构带来了更多的捐款, 当我们将夸大程度内生化时,我们发现无论监管机构是否严格,公司都倾向于通过夸大捐赠百分比来具有战略意义。随着不成熟的消费者(相信公司的说法,无论是否真实)比例的增加,捐赠比例总体上会降低,并且当监管者宽松时夸大其词的程度会增加,而当监管者严厉时会降低。在均衡状态下,如果市场规模很大,监管者就严格,否则就宽松。一项针对消费者的调查支持关于消费者缺乏对 CM 法律知识的关键建模假设。

更新日期:2022-01-17
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